Rural Housing Service (RHS) Loan Explained

The Rural Housing Service is a division of the United States Department of Agriculture. They offer a loan program that can help borrowers get financing to purchase a home. The Rural Housing Service offers guaranteed mortgage loans. This does not mean that everyone is guaranteed to get one of the loans. It means that if you get a loan from a traditional lender, the Rural Housing Service is going to guarantee the loan for you. If the borrower defaults on the loan, the Rural Housing Service will step in and repay the lender.

Getting Approved

One of the biggest advantages of this type of loan program is that it is going to help certain people get approved for loans. When the government is standing behind a loan, the lender will be much more likely to issue an approval. This means that if you have questionable credit or a low income, you are going to have a much better chance of approval with this type of loan than you would with a traditional loan arrangement.

With the guaranteed loan program, you have to have an income of below 115 percent of the median income in your area. With this type of loan program, you are not going to have to make a down payment on the house. You have to be able to afford the monthly mortgage payment, the property taxes and the insurance on the house. You also have to have a decent credit rating.

Other Factors

Closing costs do not have to come out of your own pocket. If you can get a gift or some other type of grant to pay for the closing costs, you are eligible to do so. You also have to live in the house as your primary residence once you get the loan. This loan can be used in order to purchase new homes or existing homes. You can also include enough money in the loan amount to cover necessary repairs to the property.

Direct Loans

The Rural Housing Service also engages in direct loans to the public in certain cases. This means that you are not going to be working through a traditional lender to get the loan. You are actually going to be working directly with the Rural Housing Service to get a loan. This program requires that your income is less than 50 percent of the median income in your area. This program is designed to help those that are in poverty secure the money that they need to purchase housing. This program also requires that you are ineligible for financing with other types of loans.

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